Gold buoyed by North Korea tensions, U.S. inflation data

European Shares Plummet

European Shares Plummet

On Thursday, the three major USA indexes logged their worst performances since mid-May (http://www.marketwatch.com/story/us-stocks-set-up-for-another-day-of-losses-as-north-korean-tensions-simmer-2017-08-10) in a session dogged by escalating tension between the us and North Korea.

"As a portfolio manager, you say, 'Do I think we'll get a war out of this?'" said Torsten Slok, chief worldwide economist at Deutsche Bank, referring to the back and forth between North Korea and President Donald Trump.

London's FTSE 100 dipped by about 90 points, or more than 1%, in morning trading on Friday, adding to a slump of more than 100 points the day before and taking it to its lowest level since May.

ASIA'S DAY: Earlier, Asia bore the brunt of the mounting geopolitical uncertainty, with South Korea's Kospi index closing down 1.7 percent at 2,319.71 and Hong Kong's Hang Seng ending 2 percent lower at 26,883.51.

If North Korea launches an attack that threatens the US, China should stay neutral, but if the US attacks first and tries to overthrow North Korea's government, China will stop them, a Chinese state-run newspaper has said.

Developments regarding the situation with North Korea may remain in focus next week, although traders are also likely to keep an eye on reports on retail sales, housing starts, and industrial production.

World stocks fell for a third day yesterday and investors moved back into the Swiss franc, yen and gold as North Korea ratcheted up tensions with the USA with a threat to land a missile just short of the U.S. territory of Guam.

The yen is perceived as a safe haven because Japan is the world's biggest creditor country and investors there have tended to repatriate funds in times of crisis.

The pan-European FTSEurofirst 300 index lost 1.01 per cent and MSCI's gauge of stocks across the globe shed 0.26 per cent for a weekly loss of 1.6 per cent, the largest since the week to November 4.

Several indexes closed lower overnight.

The last time the S&P closed down more than 1 percent was May 17 when it fell 1.8 percent.

"Both (PPI measures) were well below consensus and give us no hope that consumer price inflation is going to materially beat expectations", said Chris Weston, chief market strategist at IG Markets. Shanghai's main index also tumbled 1.6 percent to 3,208.54 while Australia's S&P/ASX 200 dropped 1.2 percent to 5,693.10.

Markets had seen a tentative recovery in risk appetite in U.S. and early Asian trading, but as the war of words resumed Asian stocks dropped back and London, Frankfurt and Paris all lost 0.5 to 1.2 per cent.

Biotechnology, tobacco, and transportation stocks also saw considerable strength, while steel stocks extended a recent move to the downside.

For the week, the Dow is on track for a decline of 0.9%, its biggest one-week drop since April.

"It looks like it was used as a good excuse to adjust positions", he said, referring to the latest flare-up of tensions between the United States and North Korea.

USA crude rose 0.43 percent to $48.80 per barrel and Brent was last at $52.01, up 0.21 percent on the day. The 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.